Fingrid group's Interim report 1 Jan - 30 Jun 2014

Figures in brackets refer to the corresponding period the previous year, unless otherwise stated. Financial development Jan-Jun 2014 • The Group's turnover between January and June was 305 (280) million euros • The Group's net profit was 99 (69) million euros. • Consolidated profit for the financial period was 76 (40) million euros. • The cash flow from the Group's operations with capital expenditure deducted was 97 (39) million euros • Interest-bearing borrowings totalled 1,056 million euros (977 million). • Capital expendidure was 57 (64) million euros. • The equity ratio was 29.8% (28.9%) • Earnings per share totalled 22,906 (11,990) euros Financial development Apr-Jun 2014 • The Group's turnover between April and June was 114 (110) million euros • Operating profit for the second quarter of the year was 20 million euros (-10 million). • The Group's profit between April and June was 14 (-15) million euros

KEY FIGURES		1–6/14	1–6/13	change %	4-6/14	4-6/13	change %	1–12/13
Turnover	MEUR	305.3	280.1	9.0	114.1	109.5	4.1	543.1
Capital expenditure, gross	MEUR	57.5	63.6	-9.6	25.9	29.1	-11.2	225.3
- % of turnover	%	18.8	22.7		22.7	26.6		41.5
Research and development expenses	MEUR	0.9	0.9	1.9	0.5	0.4	11.7	1.8
- % of turnover	%	0.3	0.3		0.4	0.4		0.3
Personnel, average		297	282	5.3	306	288	6.2	277
Personnel at the end of period		317	296	7.1	317	296	7.1	287
Salaries and remunerations total	MEUR	10.4	9.4	10.2	5.2	4.8	8.1	19.0
Operating profit	MEUR	99.0	69.0	43.6	19.7	-10.2	293.4	115.3
- % of turnover	%	32.4	24.6		17.2	-9.3		21.2
Profit before taxes	MEUR	95.0	52.7	80.4	17.2	-20.1	185.5	87.3
- % of turnover	%	31.1	18.8		15.1	-18.4		16.1
Profit for the financial period	MEUR	76.2	39.9	91.0	13.8	-15.2	191.3	90.7
Comprehensive income	MEUR	75.8	35.6	112.8	13.9	-14.6	195.1	86.1
Return on investments (ROI)	%							6.3
Return on equity (ROE)	%							15.0
Equity ratio	%	29.8	28.9	3.1	29.8	28.9	3.1	29.5
Interest-bearing net borrowings	MEUR	1056.2	977.3	8.1	1056.2	977.3	8.1	1076.7
Gearing		1.7	1.7		1.7	1.7		1.7
Profit/share	€	22 905.6	11990.3	91.0				27 277.9
Dividend/A shares	€							29788.9
Dividend/B shares	€							16038.5
Equity/share	€	191 459	178 125	7.5				193 293
Dividend payout ratio A shares	%							109.2
Dividend payout ratio series B shares	%							58.8
Number of shares
– Series A shares	shares	2 078	2 078		2 078	2 078		2 078
– Series B shares	shares	1 247	1 247		1 247	1 247		1 247
Total	shares	3 325	3 325		3 325	3 325		3 325

President of Fingrid Jukka Ruusunen: "Strong import of electricity in the first half-year”

Fingrid’s first half-year result developed favourably on the whole.

Fingrid’s transmission connections to Sweden were in heavy use during the period. The transmission connections, however, are not sufficient in all conditions for such great import of electricity, which results in a higher regional price for electricity in Finland compared to other Nordic countries. In a maximal import situation, faults in transmission connections are immediately visible in the price of electricity. Because of the market situation, in the first half of the year Fingrid’s congestion income has been clearly higher than in the previous year.

The company has continued the implementation of its investment programme, which amounts to about 150 million euros per year. The focus of investments has now moved to the west coast. Increased wind power construction is also evident in the company’s investment programme. During the spring, the company has made an investment decision concerning five power lines and substations, which connect wind power to the main grid. The total value of these investments is more than 50 million euros and the projects will be completed during 2015 and 2016.

Calculation principles

Fingrid's interim report has been drawn up in accordance with standard IAS 34, Interim Financial Reporting. In this interim report, Fingrid has followed the same principles as in the annual financial statements for 2013, with the exception of hedge accounting for electricity derivatives, which were wound up at the beginning of 2014, as a result of which the entire change in value of the said derivatives has been entered and will continue to be entered in the income statement. The hedge fund in the balance sheet will be dismantled in the income statement deducted from the profit of 11.6 million euros in equal instalments during 2015 and 2016.

Financial result

Group turnover for the second quarter of the year was 114 (109) million euros. Grid revenue was 61 (57) million euros in the the second quarter. Other operating income was 1 (2) million euros. Costs for the second quarter were 106 (107) million euros.

The Group's turnover between January and June was 305 (280) million euros. During the first half of the year, grid revenue rose to 185 (173) million euros, mainly as a result of the tariff increase of 8% carried out at the beginning of the year. Other operating income was 2 (3) million euros. Costs for the period January to June were 211 (210) million euros.

In the period January-June, the consumption of electricity remained on the same level as last year at 42.7 (43.4) TWh. Sales of imbalance power were 77 (75) million euros. Fingrid's congestion income from connections between Finland and Sweden increased significantly to 24 (5) million euros. The increase in congestion income resulted from the market situation in which Finland has imported a significant amount of electricity from Sweden. Cross-border transmission income from the connection between Finland and Russia decreased to 4 (8) million euros. This is a result of a reduction in import from Russia. Congestion income from connections between Finland and Estonia decreased, and European inter-TSO compensation income increased from the level in the corresponding period of last year.

Imbalance power costs were less than last year at 52 (58) million euros. The decision was therefore made in June to reduce the prices of the balance service from 1 August 2014. Loss energy costs increased to 34 (27) million euros as a result of greater losses and the increased price of loss energy compared to the reference period. At the end of June, approximately 96 (97) per cent of Fingrid's projected loss energy procurement for the remaining part of 2014 had been hedged at an average price of 42.4 (47.3) euros per megawatt hour.

The costs of reserves, which safeguard the system security of the power system, decreased by 28 (32) million euros during the review period due to a fall in the market prices of reserves and as a result of the good market situation. As a consequence of the completion of several investment projects, depreciations increased by 6 million euros. Maintenance management costs fell to 7 (9) million euros. The costs for repairing the fault in the Fenno-Skan 1 direct current connection increased the maintenance management costs from the previous year.

Turnover and other income (million €) €)	1-6/14	1-6/13	change %	4-6/14	4-6/13	change %
Grid service revenue	185	173	6.9	61	57	6.5
Sales of imbalance power	77	75	2.2	35	35	0.1
ITC income	7	5	27.4	3	2	14.0
Cross-border transmission income	4	8	-46.3	2	3	-39.9
Finland-Estonia congestion income*	1	2	-73.9	0	2	-90.7
Peak load capacity income**	4	9	-56.9	2	5	-57.4
Finland-Sweden congestion income	24	5	412.2	9	4	123.0
Other turnover	4	3	51.4	2	1	56.1
Other operating income	2	3	-37.0	1	2	-70.6

Turnover and other income total	307	283	8.6	115	111	3.0

Costs (million €)	1-6/14	1-6/13	change %	4-6/14	4-6/13	change %
Purchase of imbalance power	52	58	-11.8	24	27	-9.3
Cost of loss energy	34	27	25.4	16	12	29.0
Depreciation	46	40	14.6	24	20	15.0
Estlink grid rents	0	2	-100.0	0	2	-100.0
Cost of reserves	28	32	-12.9	15	20	-24.6
Personnel costs	12	11	8.0	6	6	3.5
Cost of peak load capacity**	4	9	-57.6	2	5	-57.7
Maintenance management costs	7	9	-27.9	4	5	-24.9
ITC charges	5	5	6.5	2	2	-0.3
Other costs	24	15	57.4	12	7	72.3

Costs total	211	210	0.6	106	107	-1.1

Operating proﬁt excluding the change in the fair value of commodity derivatives	96	73	31.4	9	4	103.8
Operating profit of Group, IFRS	99	69	43.6	20	-10	293.4

*Fingrid's income from the congestion income between Finland and Estonia was 0.6 million euros. There were no costs (Finland-Estonia grid rental) during the period under review, since the EstLink connection has been under Fingrid's ownership since 30.12.2013. Before the transferral of ownership, congestion income profits between Finland and Estonia were paid as grid rental to the owners of the connection.
**The peak load capacity income and costs are related to the securing of the sufficiency of electricity during peak consumption hours within the framework of the Finnish Peak Load Capacity Act.

Group operating profit for the second quarter of the year was 19.7 (-10.2) million euros. The profit before taxes was 17.2 (-20.1) million euros. Profit in the review period was 13.8 (-15.2) million euros and total comprehensive income 13.9 (-14.6) million euros. In the review period, net cash flow from the operations of the Group with capital expenditure deducted was 24 (39) million euros positive.

The operating profit of the Group in the first half of the year was 99 (69) million euros. The profit before taxes was 95 (53) million euros. Profit for the financial period was 76 (40) million euros and total comprehensive income 76 (36) million euros. The greatest positive differences from the corresponding period the previous year can be attributed to changes in the fair value of derivatives (19 million euros) and congestion income from the Nordic countries (19 million euros). In the first half year, cash flow from the operations of the Group with capital expenditure deducted was 97 (39) million euros positive. The equity ratio was 29.8 (28.9) per cent at the end of the review period.

The Group's profit for the financial period is characterised by seasonal fluctuations, which is why the profit for the entire year cannot be directly estimated on the basis of profit from this review period.

Investments and maintenance

Fingrid’s investment programme is proceeding according to plan. Dozens of projects to improve the operational reliability and transmission capacity of the main grid are ongoing in different parts of Finland. The focus of the investment programme is moving to the west coast. Significant projects are the EUR 25.5-million Hikiä-Forssa project and the EUR 16.7-million Ulvila-Kristinestad project.

In the review period, the decision was made to construct a 400kV power line between Hirvisuo and Kalajoki, the total costs of which will be about 18 million euros. During the spring, Fingrid made five investment decisions, which will connect wind power to the main grid. The total value of investments to be completed in 2015-2016 exceeds 50 million euros. According to Finland’s energy and climate strategy, the production of wind power will be increased to 9 terawatt hours by 2025.

The operational reliability of power lines has been improved by clearing about 5,000 ha. of land around the lines during this year and by taking care of trees in about 900 km of marginal zones.

During the spring, according to an ITOMS (International Transmission Operations & Maintenance Study), Fingrid was found to be amongst the best in the world in maintenance management in terms of both quality and costs.

Power system

Electricity consumption in Finland in the period April-June was 18.9 (18.9) terawatt hours. Between January and June, electricity consumption in Finland totalled 42.7 (43.4) terawatt hours. A total of 34 (32.5) terawatt hours of electricity was transmitted in Fingrid's grid during the same period, representing 79.6 per cent of the electricity consumption in Finland.

Between April and June, 4.2 (2.6) TWh of electricity was imported from Sweden to Finland, and 0.04 (0.3) TWh was exported from Finland to Sweden. Between January and June, 9.3 (4.8) TWh of electricity was imported from Sweden to Finland, and 0.07 (0.6) TWh was exported from Finland to Sweden.

Between April and June, the volume of electricity imported from Estonia was 0.02 (0.2) TWh and 1.0 (0.3) TWh was exported from Finland to Estonia. The volume of electricity imported from Estonia to Finland between January and June was 0.03 (0.4) TWh and 2.3 (0.6) TWh was exported from Finland to Estonia.

Between April and June, 0.5 (0.9) TWh of electricity was imported from Russia to Finland, and between January and June the import volume was 1.3 (2.7) TWh. The transmission capacity of electricity from Russia to Finland has been fully available, with the exception of maintenance work performed on the Russian grid during April. During the maintenance work, the transmission capacity was less than normal, but still sufficient for market needs. The import of electricity from Russia has been small, as it was the previous year. Import fluctuation within 24-hour periods, however, has been great.

The Fenno-Skan 1 direct current connection between Finland and Sweden was disconnected from the grid on 25 May 2014 and was out of use until 27 May 2014. The Estonian direct current connection EstLink 2 was disconnected on 25 June and reconnected on 26 June. Fenno-Skan 1 was disconnected from the grid on 28 June and reconnected on 29 June. Ongoing investment work in Ostrobothnia required outage arrangements and the operational reliability of the main grid was ensured in May-June by purchasing local electricity production for the grid and by using Fingrid's Kristiina reserve power plant.

Power system operation	1-6/14	1-6/13	4-6/14	4-6/13
Electricity consumption in Finland TWh	42.7	43.4	18.9	18.9
Fingrid's transmission volume TWh	34.0	32.5	15.8	14.9
Fingrid's loss energy volume TWh	0.6	0.5	0.3	0.2
Electricity transmission Finland - Sweden
Exports to Sweden TWh	0.07	0.6	0.04	0.3
Imports from Sweden TWh	9.3	4.8	4.2	2.6
Electricity transmission Finland - Estonia
Exports to Estonia TWh	2.3	0.6	1.0	0.3
Imports from Estonia TWh	0.03	0.4	0.02	0.2
Electricity transmission Finland - Russia
Imports from Russia TWh	1.3	2.7	0.5	0.9

Electricity market

During the second quarter of the year, the average Nordic price (system price) of electricity was 25.68 (38.75) euros per megawatt hour and the Finnish regional price was 34.55 (39.93) euros per megawatt hour. During the first half of the year, the average price (system price) on the Nordic spot markets was 27.92 (40.37) euros per megawatt hour and the Finnish regional price was 34.89 (41.01) euros per megawatt hour.

Fingrid's counter trade costs between January and June were approximately 6.5 (0.5) million euros, which were related to ensuring operational reliability in connection with outage arrangements required by investment projects and to disturbances in Fenno-Skan connections.

Electricity market	1-6/14	1-6/13	4-6/14	4-6/13
Nord Pool system price, average €/MWh	27.92	40.36	25.68	38.75
Area price Finland, average €/MWh	34.89	40.99	34.55	39.96
Congestion income between Finland and Sweden, million €*	47.7	9.3	17.7	7.9
Congestion hours between Finland and Sweden %*	46.7	9.3	31.5	11.1
Congestion income between Finland and Estonia, million €*	1.1	4.4	0.3	3.4
Congestion hours between Finland and Estonia %*	6.86	29.9	2.43	33.3

*The congestion income between Finland and Sweden as well as between Finland and Estonia is divided between the relevant TSOs in equal proportions. The income and costs of the transmission connections are presented in the tables under Financial Result.

Financing

The financial position of the Group continued to be satisfactory. The net financial costs of the Group in the period April-June were 3 (10) million euros. The net financial costs between January and June were 5 (17) million euros, including the positive change of 5 (-7) million euros in the fair value of derivatives. Financial assets recognised at fair value in the income statement, and cash and cash equivalents amounted to EUR 203 (215) million on 30 June 2014. Moreover, the company has an undrawn revolving credit facility of 250 million euros.

Interest-bearing loans totalled 1,260 (1,192) million euros, of which 1,012 (1,018) million euros were long-term and 248 (174) million euros were short-term.

The counterparty risk involved in the derivative contracts relating to financing was 34 (50) million euros.

In the second quarter, the company organised 110 million euros of finance from private capital markets with a maturity of 15 years.

On 14 April 2014, the international rating agency Standard & Poor’s Rating Services (S&P) changed Fingrid Oyj’s outlook changed from stable to negative. The deterioration in outlook is a direct result of the similar deterioration in the outlook of the Finnish government, which is Fingrid’s majority owner.

Personnel

In the first half of the year, Fingrid had 297 (282) employees, 271 (264) of whom were employed permanently.

Auditing

The consolidated figures in this Interim Report are unaudited.

Shareholders' Meetings and dividend policy

On 6 June 2014, the shareholders concluded a new shareholder agreement concerning A- and B-shares. On the same day, the Annual General Meeting was held, which elected the Board of Directors, and decided on changing the Articles of Association and on holding an extraordinary general meeting. The changes to the Articles of Association concerned, among other things, specification of the definitions of the company’s field of business, a regulation concerning distribution of dividends between A- and B-shares, majority voting requirements concerning a change to the Articles of Association, the fact that personal deputy members will no longer be elected as ordinary members of the Board, the repeal of the regulation concerning the upper age limit for Board members, the Advisory Committee and other changes of a technical nature. All decisions made at the Annual General Meeting were reported on 6 June 2014 on the company’s website and on the London Stock Exchange.The Annual General Meeting also accepted the financial statements for 2013, confirmed the income statement and balance sheet, and discharged the members of the Board of Directors and the President from liability.

The Annual General Meeting elected Helena Walldén M.Sc. (Tech.) as the Chairman of the Board of Directors for 2014 and Juha Majanen (Budget Counsellor, Ministry of Finance) as Deputy Chairman. Other members elected to the Board were Managing Director Sirpa Ojala, and Directors Esko Torsti and Juhani Järvi.
The Board assembled on 6 June approved Fingrid's dividend policy. All decision made at the Annual General meeting were reported on 6 June 2014 on the company’s website and on the London Stock Exchange.

The Annual General Meeting decided to pay a dividend of 6.7 million euros. The extraordinary general meeting held on 18 June decided to pay an additional dividend of 75.2 million euros. These dividends were paid in June 2014.

Events after review period and outlook for the remaining part of the year

Fingrid Group's profit for the financial year 2014 before taxes and without the change in the fair value of derivatives is expected to increase from the previous year. The uncertainty involved in reserve costs, congestion income and in cross-border income on the interconnections from Russia makes it difficult to anticipate Fingrid’s financial result for the entire year.

Notes: Tables for the Interim Report 1 January – 30 June 2014

Further information:
Jukka Ruusunen, President & CEO, tel. +358 30 395 5140 or +358 40 593 8428
Jan Montell, Chief Financial Officer, tel. +358 30 395 5213 or +358 40 592 4419